This time, President Obama wanted to pull away from diplomatic language and speak openly, directly and clearly about the true dimensions of the global oil market collapse and rapidly dropping oil prices. He said in a radio interview that this collapse was a “political decision,” aimed at weakening Russia’s economy, 50 percent of which is dependent on oil revenues. It has nothing to do with the alleged desire of some OPEC countries to face the threat of the growing shale oil production in the United States; and the Saudi oil minister has confirmed, more than once, that this “confrontation” is the underlying cause for Saudi Arabia’s decision to leave the price of the oil barrel staggering.
It was “a political decision,” and not just an economic matter or an objective consequence of the laws of “supply and demand,” as acknowledged by President Obama. The consequences of that decision greatly contributed to addressing Russian President Putin’s aggression towards Ukraine, in annexing Crimea to Russia and “invading” eastern Ukraine. This will make Putin know for sure he made a strategic mistake.
Former Republican presidential candidate John McCain did not want this “achievement” to be attributed to the Democratic President Obama, and did not want to see Russia — and Iran —suffering economically as the result of his Democratic administration’s actions. He said that the United States should thank Saudi Arabia for its effort to reduce oil prices, which caused the damage to the Russian and Iranian economies. Earlier, the Russian president himself has talked about what he called a” conspiracy” between Saudi Arabia and the United States, aimed at subduing Russia and Iran by allowing oil prices to collapse. He promised to address this “conspiracy,” the existence of which Riyadh publicly and officially denied, putting the burden of responsibility on the oil-producing countries outside OPEC for the oil surplus in the market, and the collapse of oil prices after that.
Putin, in his Euro-Ukrainian strategy, was expecting that Russia would be able to resist Western pressure by selling “cheap Russian oil” much lower than the international market price — “high,” according to one old Russian prediction. Today the price of oil has crumbled all around the world. Putin has burned the card he had of selling oil at a price lower than the high market price.
What makes matters worse for Russia is that it will find great difficulty in managing its presumed counter-campaign a with China. This strategic neighbor to Russia, the largest oil consumer in the world, has a clear interest in the collapse of world oil prices. Russia cannot lure China to substitute its goods in place of European goods in its consumer markets. Its reserve of foreign currency, the dollar in particular, is running out because of Western sanctions and the collapse of oil prices. In addition, the Chinese industrial economy is having difficulty growing, and low oil prices would help Chinese industrial exports to grow in the international and Western consumer markets.
The United States expects that Russia will show moderation in dealing with Ukraine, Europe and the Middle East, by waving “the white flag”; otherwise, it will have to continue its “adventure” with uncalculated consequences. Saudi Arabia is worried by President Obama’s words on the important regional role of Iran, and by Washington’s insistence on reaching a “long-term nuclear agreement” with Tehran. It is expecting that weakening the Iranian economy will weaken its negotiating — nuclear — and political power. In that way, Iran will not obtain what it wants from this convention and its influence will retreat and shrink in Syria, Iraq, Lebanon and Yemen. However, can Moscow and Tehran have an alliance, and a new OPEC emerge where there will be no place for Saudi Arabia, and China be tempted to join this alliance by setting the price of Russian, Iranian and Venezuelan oil with its currency, the yuan?!